Key Elements of a Successful Business Plan
An essay written in prose.
Discuss what products and services your business provides and how it differs from competitors. Show that it fills a valid market need that will continue to generate profits in the future.
Conduct a comprehensive competitor analysis. Outline their strengths, weaknesses, opportunities, and threats.
1. The Executive Summary
Executive summaries are often the opening pages of any business plan and should quickly capture a reader’s interest. Here, it should explain to potential investors why your company needs their funds as well as its unique features that distinguish itself from similar organizations in your industry.
The company description should inform readers about your business activities and motivation. In addition, this section should describe who’s involved with running it and its legal structure.
A good business plan should also include an in-depth market analysis. You should clearly outline how large you believe the target market for your products to be and what competitors are up to – this is particularly relevant when establishing innovative new businesses that may fail without it being available at the right time and place.
2. The Company Description
An accurate description of what your company provides and does is essential whether you’re trying to attract investors, new customers or simply define your business philosophy. Furthermore, this detail could play an integral role in helping attract external executive help or loan financing options.
Detail your product or service in detail, outlining how it stands out from competitors and highlighting your strengths, weaknesses, opportunities and threats – this process is known as SWOT analysis.
Include information on your company structure, legal entity and management team as well as your vision of how you expect the business to make an impactful contribution once its goals have been reached. If any extra details that don’t pertain directly to main sections are relevant for inclusion such as resumes of team members or long-term financial projections in an appendix section. You could also add production plans and facility specifications details.
3. The Market Analysis
An essential tool when starting their own company, the business plan can help secure funding from investors and lenders while showing investors that your industry knowledge and financial projections make for an impressive business proposition. An essential section of any plan should also include market analysis.
This analysis details the size, trends, customer segments and buying patterns within your target market. With this knowledge at hand, it should help determine how many clients you can realistically serve within it.
Market analysis should also detail your direct competitors. Create a list and take time to examine each one individually in terms of strengths, weaknesses and advantages in the marketplace – such as free delivery or discounts for repeat customers; donate a percentage of profits to charity; pass along cost savings to customers etc.
4. The Marketing Strategy
Successful businesses start with great ideas, but to fully establish, run, and expand them it takes much more than that. A clear revenue model helps investors and entrepreneurs understand how profits will be generated for a business.
This section of a business plan should detail a company’s goals, objectives, and marketing strategy for both current and potential customers. Furthermore, the firm should identify its strengths and weaknesses relative to competitors as well as how the business plans to reach success. A marketing penetration strategy might offer faster return on marketing investments than market development, though this depends on existing customer bases; an effective and well-defined marketing plan can attract new customers while keeping old ones coming back, ultimately increasing profit and sales.
5. The Financials
Financial plans must include a break-even analysis, profit projections and other important details that show investors that your sales can cover all expenses while producing an acceptable return on investment. This step should help secure funding.
This section should also highlight any intellectual property, patents or trademarks owned by the company as a way to differentiate it from competitors and establish competitive advantages.
An effective business plan is an invaluable asset for entrepreneurs and corporate managers alike, helping companies access investment capital while determining its fate. Before creating one, however, it’s essential that business plan creators understand its purpose and what kind of audience it’s meant for – smart startups will usually create several versions in case different needs arise.
6. The Management Team
An effective management team is key to making any business a success and weathering commercial challenges. An ideal management team should include members with different skill sets that complement each other to achieve success.
They should also possess an outstanding work ethic, be adept at recognizing opportunities as they present themselves and can effectively communicate with both the rest of the management team and external stakeholders.
Management teams should be results oriented, knowing that their competence and credibility will be judged by their accomplishments. A management team should push for positive results as part of its business goals and understand that results must be produced to remain in business. Furthermore, management teams should accept constructive criticism and feedback in a constructive manner and remain open to constructive changes – this can help significantly when looking at succession planning.
7. The Competitive Analysis
Knowing and understanding your competition is a vital aspect of running any business, particularly when seeking funding. Potential investors and banks will want to see this section of your plan so they can determine whether they should invest in your venture or not.
Conducting a competitive analysis will enable you to identify your strengths, weaknesses, opportunities and threats, helping you establish yourself on the market while avoiding unprofitable markets and making smarter decisions that could increase sales and profit.
First, identify your direct competitors – these would include any businesses offering the same product in your location and to your target audience. Next, study their pricing structures, marketing strategies and customer service practices in order to discover ways you can differentiate yourself. It also presents an excellent opportunity to highlight any unique features you possess that might add value for customers.
8. The Operations Plan
An operational plan is a tool used by management teams and department heads to align daily activities with strategic objectives. It identifies initiatives which will achieve goals on schedule while outlining who bears responsibility and accountability for each initiative.
Plans need to outline who will be accountable for completing each task and where daily operations will take place, while also outlining suppliers, production locations and any external points of contact that need to be identified. It must also contain milestones and timelines for reaching goals and tasks as well as financial milestones that allow businesses to monitor performance over time.
If your plan is intended to attract investors or lenders, your financial section should provide details of your legal structure and how you anticipate generating revenue. Furthermore, an income statement and cash flow projection may help potential investors gauge how much funding to provide; additionally, this section may demonstrate how the money from investors or lenders could be reinvested back into your business.
9. The Financial Forecast
Financial forecasts are estimates of future expenses and revenue based on past performance, company goals and priorities, current business conditions and additional information gleaned from outside sources. While budgets provide an outline for spending plans and revenue estimates, forecasts offer greater detail for potential expenses and revenue projections and are regularly updated based on new information.
Financial forecasts typically consist of profit and loss statements, cash flow statements and balance sheets compiled using internal accounting data such as pricing units volume AR/AP timing assumptions as well as fixed/variable expense assumptions.
Once all components of an organization’s budget are in place, it becomes easier for businesses to assess their strengths and weaknesses and take steps to enhance performance. A financial forecast, for example, can assist a startup in calculating what it needs to sell to break even, secure investors or loans, identify growth opportunities, as well as serve as a benchmark against actual results. While budgets and forecasts may seem similar, they serve different functions and should never be confused.
